TitleNews Online Archive

TitleNews Online Archive

Texas sues Farmers Insurance

August 7, 2002

State advises other insurance providers to 'sit up, take notice'

Inman News Features

Texas Gov. Rick Perry and Attorney General John Cornyn yesterday announced that in an unprecedented move, the state is suing Farmers Insurance alleging that the insurance provider uses deceptive trade and discriminatory practices in Texas.

"In the legal action being filed today, we allege that Farmers Insurance has been deceptive and discriminatory, and they have hit Texas consumers in the two places they are most sensitive and should be secure: in their pocketbooks and in their homes," said Cornyn.

The Texas Department of Insurance and the Attorney General's Office opened investigations earlier this year into the practices of insurance companies, particularly the top three, which have 66 percent of the market in Texas – Allstate, State Farm and Farmers. Farmers and its subsidiaries represent nearly 20 percent of the homeowner's insurance market in Texas, according to a statement released by the governor's office.

"The investigations are still ongoing, but the findings reflect that at least one company – Farmers Insurance – has engaged in unfair, discriminatory practices to charge consumers excessive and unjustified rates," said Perry.

The lawsuit alleges that Farmers Insurance has charged Texas policyholders for natural disasters occurring in other states, has used credit history as a significant factor in setting premiums and that the company has discriminated against groups of homeowners in some regions of the state by switching all of its policyholders to policies that limit coverage for water damage.

The lawsuit seeks civil penalties of up to $10,000 per violation and $25,000 for each Texan harmed by any of Farmers' alleged illegal practices. Civil penalties could range in the millions of dollars, with the estimated refund to policyholders reaching as high as $140 million, according to Cornyn.

"The lawsuit that the Attorney General filed this morning sends a clear message that unfair and deceptive insurance practices will not be tolerated. Other insurance carriers in Texas would be wise to sit up and take notice," said Perry.